P

Abstract

Paasche price index. A current year weighted PRICE INDEX. Expenditure in the current year, 2, is expressed as

$$\sum\limits_{{i=1}}^{{i=n}} {{{p}_{{2,i}}}\cdot {{q}_{{2,i}}}}$$

where p and q are prices and quantities. For the previous year 1, however, we calculate the original prices but weight them by the current year quantities. That is

$$\sum\limits_{{i=1}}^{{i=n}} {{{p}_{{1,i}}}\cdot {{q}_{{2,i}}}}$$

so that the ratio of the two expenditures gives a price index of the form:

$$\frac{{\sum\limits_{{i=1}}^{{i=n}} {{{p}_{{2,i}}}\cdot {{q}_{{2,i}}}} }}{{\sum\limits_{{i=1}}^{{i=n}} {{{p}_{{1,i}}}\cdot {{q}_{{2,i}}}} }}$$

(See LASPEYRES PRICE INDEX, PRICE INDEX.)